Correlation Between BW Offshore and Sealed Air

Can any of the company-specific risk be diversified away by investing in both BW Offshore and Sealed Air at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BW Offshore and Sealed Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BW Offshore and Sealed Air Corp, you can compare the effects of market volatilities on BW Offshore and Sealed Air and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BW Offshore with a short position of Sealed Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Sealed Air.

Diversification Opportunities for BW Offshore and Sealed Air

0.35

Correlation Coefficient

BW Offshore  Sealed Air

Weak diversification

The 3 months correlation between 0RKH and Sealed is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Sealed Air Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air Corp and BW Offshore is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BW Offshore are associated (or correlated) with Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air Corp has no effect on the direction of BW Offshore i.e., BW Offshore and Sealed Air go up and down completely randomly.

Pair Corralation between BW Offshore and Sealed Air

Assuming the 90 days trading horizon BW Offshore is expected to generate 1.21 times less return on investment than Sealed Air. In addition to that, BW Offshore is 1.9 times more volatile than Sealed Air Corp. It trades about 0.04 of its total potential returns per unit of risk. Sealed Air Corp is currently generating about 0.09 per unit of volatility. If you would invest  3,365  in Sealed Air Corp on September 14, 2024 and sell it today you would earn a total of  244.00  from holding Sealed Air Corp or generate 7.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

BW Offshore  vs.  Sealed Air Corp

BW Offshore

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BW Offshore may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sealed Air Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sealed Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BW Offshore and Sealed Air

The main advantage of trading using opposite BW Offshore and Sealed Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, Sealed Air can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sealed Air will offset losses from the drop in Sealed Air's long position.

The idea behind BW Offshore and Sealed Air Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.